The ‘Liechtenstein solution’ is not a model that the UK could use to permanently control migration

Christian Stensrud, 11 October 2016

Richard North has published a blog[i] outlining criticisms of my recent research. My research primarily outlined why Article 112 in the EEA Agreement could not be used by the UK to gain permanent migration controls. Whilst this article is partly a response to his blog, the primary purpose is to layout my argument based on my previously unpublished research. In doing so, I hope to clarify my position by addressing some of the criticisms of my argument.

Before I explain why I do not think Article 112 is suitable, it is important to clarify that, despite North’s displeasure that Civitas did not contact him, my research was not primarily concerned with his work. Hence why I only refer to his work in one paragraph. Instead, my research was a response to a claim made in a Futurus[ii] report and it was therefore sent to the director of that think tank: Mr Anthony Scholefield. Subsequently, Mr Scholefield asked if he could forward my research to a number of people for their comments, including Mr North, and we agreed.

The aim of our correspondence was to create a productive debate regarding Article 112 and its application to the free movement of people. This blog has the same aim.

To clarify, Article 112 allows Contracting Parties to unilaterally take appropriate safeguarding measures if ‘serious economic, societal or environmental difficulties of a sectoral or regional nature liable to persist are arising’.[iii] Article 113 specifies the procedures and conditions for enacting Article 112.

According to the Futurus report I was critiquing, these Articles ‘allow of right and without any permission from the EU or anybody else for any EEA/EFTA state[iv] to apply migration controls as safeguard measures.’[v] It is implied that the UK, via these Articles, could unilaterally apply migration controls as safeguarding measures if it left the EU but remained within the EEA and re-joined EFTA. Currently, the UK cannot unilaterally apply independent safeguard measures because EU member states’ safeguard measures are taken by the European Commission.[vi]

Futurus’ claim takes a number of unfounded leaps. The claim ‘without any permission from the EU or anybody else’ is imprecise. According to Article 113 of the EEA Agreement, the UK would have to notify other Contracting Parties of its intention to enact safeguarding measures and could not take these measures until one month after this notification. After notification, the UK would then enter into immediate consultations with the other Contracting Parties in the EEA Joint Committee with a view to finding a ‘commonly acceptable solution.’

It is extremely unlikely that this ‘commonly acceptable solution’ would be permanent migration controls. According to Article 112(2), priority will be given to safeguard measures that will least disturb the functioning of the EEA Agreement. In addition, such measures will be restricted in their scope and duration to what is strictly necessary to remedy the situation. Because free movement of people[vii] (not just workers) is a key part of the EEA, the consultations in the EEA Joint Committee would most likely prefer policies other than migration controls.

The unlikelihood of permanent migration controls is augmented by the fact that adopted safeguard measures via Article 112 have never been permanent. Safeguard measures are subjected to consultations in the EEA Joint Committee every three months from the date of adoption with a ‘view to their abolition before the date of expiry envisaged, or to the limitation of their scope of application.’[viii] Liechtenstein has managed to gain long-term migration controls, but even these measures are not permanent. Their arrangement, called Sectoral Adaptations,[ix] is subject to review approximately every five years (the next review will take place before May 2019).[x] Three well-established law firms – Herbert Smith Freehills[xi], Matrix Chambers[xii] and Shearman & Sterling[xiii] – have also stated that the safeguard measures in Article 112 are not permanent.

In addition, each Contracting Party to the EEA Agreement could request a review of the UK’s safeguard measure at any time.[xiv] The EEA Joint Committee would conduct the review. Many members of the EEA believe that they benefit from free movement with the UK. In fact, four EU countries may be prepared to veto any Brexit deal that restricts their citizens’ rights to work and live in Britain: Slovakia, Hungary, Poland and the Czech Republic.[xv] These countries are also Contracting Parties to the EEA Agreement. As a result, it is likely that some EEA members would frequently request a review of the UK’s safeguard measure if it imposed controls on migration.

The UK could enact a safeguard measure without prior approval in ‘exceptional circumstances’ that require ‘immediate action’.[xvi] But this only gets around the problem of seeking agreement from other Contracting Parties before enacting a safeguarding measure. This type of safeguard measure would still be subjected to consultations in the EEA Joint Committee every three months from the date of adoption with a view to its abolition or limitation.[xvii] Also, other Contracting Parties would still have the ability to request a review of the safeguarding measure at any time by the EEA Joint Committee.

My argument, that a safeguard measure adopted via Article 112 is not permanent, is taken directly from the EEA Agreement and supported by the opinions of three well-established law firms.

It is worth noting that unilaterally invoking Article 112 and imposing migration controls heightens the risk of repercussions from other EEA members. If the UK’s immigration controls created an imbalance between the obligations and rights of the EEA Agreement, then any other EEA member can take ‘proportionate rebalancing measures as are strictly necessary to remedy the imbalance’.[xviii] This could involve EEA-EFTA or EU member states imposing restrictions on the UK’s access to the single market.

In looking for a precedent that the UK could follow, the Futurus report mentions Liechtenstein.[xix] The report then directs the reader to Richard North’s research. According to North, Liechtenstein’s situation sets a precedent whereby the UK could unilaterally invoke Article 112 to gain modifications to the principle of unrestricted free movement.[xx]

To clarify, Liechtenstein is the only EEA country to ‘have obtained agreement from EEA members on the imposition of limitations on free movement.’[xxi] Liechtenstein used Article 112 in 1997 as part of a process to gain long-term migration controls. This led to Liechtenstein’s current arrangement, called Sectoral Adaptations, which started in 1999 via an arrangement with the EU. This created long-term migration controls, but it was also reaffirmed that free movement of people ‘applies to Liechtenstein’.[xxii] Under the current arrangement, EEA citizens wishing to gain residence in Liechtenstein must obtain a residence permit. The arrangement establishes a minimum number of permits to be issued to EEA citizens every year, constituting an annual net increase in the residing EEA population of economically active and inactive people of 1.75% and 0.5% respectively of their number in 1998.[xxiii]

However, the Liechtenstein example is not comparable to the UK. Liechtenstein is a very small principality of 62 square miles with an estimated population of 37,000. Immigration controls were seen as justified because the country is a ‘very small inhabitable area of rural character with an unusually high percentage of non-national residents and employees.’[xxiv] The EEA Council accepted that free movement with the EEA could cause a huge increase in the number of nationals from other EEA states in comparison with the resident population.[xxv] But Liechtenstein is not a precedent for the UK because they do not share the characteristics that allowed Liechtenstein to gain migration controls. The UK is much larger, has a population of approximately 65 million people, and in 2015 the UK had a much lower percentage of non-national residents (13%) compared to Liechtenstein (34%).[xxvi]

I also cannot see how the UK could successfully argue that immigration from the EEA is posing a serious risk to UK society or the economy, as required in Article 112. The UK unemployment rate is at its lowest level since July 2005 (4.9%),[xxvii] and all regions of the UK currently suggest either flat or gently increasing employment rates.[xxviii] The UK’s average GDP growth rate from 2010 to 2015 was higher than the average growth rate of the EU, Eurozone, and two of the EEA/EFTA states (Norway and Iceland).[xxix] There is still very little evidence that immigration from the EEA has a detrimental effect on the overall level of jobs and wages,[xxx] and a lot of evidence suggests that people who migrate from the EEA make a positive contribution to the public finances.[xxxi]

In addition, the type of immigration system that Liechtenstein has is not one that would deliver on the referendum result. According to the Futurus report – which is quoting a poll by Lord Ashcroft – the Leave vote had two principal motivations: a desire for self-government and national control over immigration. However, Liechtenstein cannot solely decide on the number of EEA citizens that it accepts – Sectoral Adaptations places a minimum on this number. In addition, Liechtenstein cannot apply any other restrictions on the right of residence for EEA nationals other than those provided for in Sectoral Adaptations.[xxxii] The UK would not be able to solely decide the number of EEA citizens it allows into the country nor the features of its immigration system if it forged a similar deal. It is worth noting that Article 112 has never been used by an EEA member to gain full control over its immigration system.

[ix] Liechtenstein’s current arrangement regarding migration controls is based on an agreement with the EU that took place in 1999 called Sectoral Adaptations (although the country had migration controls before this). The arrangement was initially laid down in the Decision of the EEA Joint Committee 191/1999 and then incorporated into Annexes V and VIII of the EEA Agreement.

1 comment on “The ‘Liechtenstein solution’ is not a model that the UK could use to permanently control migration”

There is certainly a case for saying that Article 112 is not as helpful as some people have suggested, but I think you are overstating it here. In particular:

1. You say it can’t really be exercised unilaterally, because it would require the UK to enter into discussions with other contracting parties to find a commonly acceptable solution. But in reality, what is likely to happen is that the UK would say “we want to limit migration in the following ways and this is going to take effect 1 month from now”. Other parties may not like it and no doubt there would be discussions about whether the UK’s proposals could be changed, but in practice once the 1 month notification had expired, the UK could implement the controls until such time as the EFTA Court or the CJEU ruled that they were in fact illegal. This contrasts with its current position as an EU member where the UK would be acting illegally unless it obtained the Commission’s prior approval. My understanding, based on Dr North’s blog, is that when Liechtenstein’s controls were supposed to expire, it simply said “we want to continue limiting migration” and went ahead and did it. Discussions took place over some time and eventually resulted in the introduction of a quota system, but no one took Liechtenstein to the EFTA Court or the CJEU and it was able to extend its controls. So for Liechtenstein at least, Article 112 seems to have proved an effective means in practice of getting what it wanted.

2. You are right that Article 112 does not allow for permanent migration controls. However, the reality is that Liechtenstein has been able to extend its supposedly temporary controls from 1997 (when they were supposed to expire) until today. And even if the UK were only able to impose temporary controls, that in itself could be sufficient to allay the electorate’s concerns about migration because politicians could say to voters “don’t worry, if numbers increase and problems occur again in future, we can exert control using Article 112.”

3. That brings us onto your main point, which is that the UK (as a country of 65 million) is not comparable to tiny Liechtenstein. But that assumes that the UK would be seeking to make that comparison in the first place, when in fact it would probably make a somewhat different argument. It might well start by making the point that the UK has had high levels of immigration from the EEA over the last decade – initially because it did not impose controls on the Member States that joined in 2004 and more recently because of high unemployment in some of the older Member States e.g. Spain, Greece etc. Significant numbers of those EEA migrants (particularly from the new Member States) moved to more sparsely populated areas which had not historically experienced high levels of immigration before and were ill equipped to cope with the influx. For those areas in particular and for the country as a whole, this has placed considerable strains on social cohesion (you need look no further than the Brexit vote for evidence of that!) – hence the justification for temporary controls. Indeed, the Commission has already accepted a version of this argument when it agreed to let the UK impose limitations on claiming benefit payments if the UK voted to Remain. Speaking as a Remainer, I agree with what you say about the objective evidence for adverse effects of migration being rather thin. However, I don’t necessarily think that would prevent the UK making a reasonable case for at least temporary controls on migration so that the country can take a bit of time to absorb the population changes which have occurred already.

So to conclude, whilst Article 112 is unlikely to allow the full control over immigration that some more extreme Brexiteers would like, in my view it does offer a potentially useful template for some form of compromise solution on the vexed issue of immigration from the EEA Member States.

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